Even $1.5 million is "just enough to buy a little repairman" in some markets

Even $1.5 million is “just enough to buy a little repairman” in some markets

After a pandemic-inspired move to suburban New Jersey, Rebecca Goldberg Brodsky was eager to return to Brooklyn. An interior designer, she missed the vibrancy of New York and the relationships she had made while living there.

Goldberg Brodsky and her husband searched the neighborhoods of Brooklyn for six months, but without success with their budget of around $400,000. So they decided to “go all out,” she says, moving their assets so they could spend a lot more. Eventually, they found a three-story apartment — it’s located in what was once a church — for $1.1 million in Park Slope and moved in in September 2021.

Ecstatic to live somewhere with good public schools and a bustling community, Goldberg Brodsky was willing to ignore the old flooring, the lead paint, and the sky-high price tag. That is, until his “new” refrigerator broke down and an exterminator discovered the apartment was infested with mice.

“It was a lot more expensive than expected,” says Goldberg Brodsky, estimating they spent around $30,000 on the kitchen remodel. “We’re very lucky in many ways in that we’ve made more money during COVID, and we’ve been able to come together to make it work.”

Courtesy of Rebecca Goldberg Brodsky

Soon the dreams of using their renovation budget on new paint and floors dissipated; Goldberg Brodsky and her husband instead had to spend tens of thousands of dollars to protect their new home from vermin by installing wire mesh in the walls and replacing old windows.

They are far from alone. In today’s housing market, even a price of over a million dollars does not guarantee buyers a luxury home in some areas. In fact, many find they have to shell out more after purchase – potentially tens of thousands of dollars – to make their new home livable.

Of course, many new homeowners want to update the kitchen cabinets or change the paint color of the bedroom for aesthetic reasons, as Goldberg Brodsky and her husband intended to do. But during last year’s scorching housing market, with many buyers taking all they could get and prices rising exponentially, spending seven figures was often just the start of the journey. financial.

“I’m okay with that mentally as long as this economy holds up and it doesn’t turn out to be a catastrophic event,” says Goldberg Brodsky. “My hope is five, 10 years from now, I can say it was worth it.”

Houses are getting smaller and getting older

In booming markets like Dallas, Phoenix, San Francisco (and surrounding areas), Seattle and others, the cost per square foot is rising, according to Zillow data, and so million-dollar homes are becoming more small. The typical $1.5 million home sold in Q3 2022 was 2,959 square feet, up from 3,342 square feet in Q3 2020.

They’re also less likely to be blank, turnkey builds, says Jeff Tucker, senior economist at Zillow. The median age of a $1.5 million home sold is also much higher, dropping from 28 in Q3 2020 to 35 in Q3 2022.

“The caliber or size and quality of homes that will sell for $1.5 million have all really dropped because overall price levels have pushed really high over the last couple of years,” says Tucker. “Homes that look surprisingly normal rather than lavish mansions are now selling for this quite extraordinary price.”

An old house does not necessarily mean that it is in poor condition. But it increases the chances of needing some updates to bring it up to modern code. Especially in the expensive West Coast markets, $1.5 million “may be enough to buy a little repairman,” says Tucker.

“People may be paying that much for a house and finding heating systems or electrical systems that are decades old,” says Tucker. “Not only did they spend $1.5 million on the house, but they have to turn around and shell out tens of thousands of dollars for major system repairs.”

A few years ago, a house in the more expensive neighborhoods of a place like Seattle would have only cost at least $1.5 million if it was something truly unique or custom, Tucker says. Now entire neighborhoods are priced at this level.

Amanda McAvena and her husband spent more than double $3.5 million on a Brooklyn townhouse last year that has had to undergo its fair share of renovations. Like Goldberg Brodsky, McAvena also had to redo the kitchen when she moved in.

“The listing photos, they did a good job, but…there weren’t even basic things to live with, the stove barely worked,” McAvena says. Upon moving in, she and her husband quickly had to replace the lead paint cabinets, water main and windows in their home.

It’s disappointing, says the 36-year-old, especially since she and her husband have been saving since their early twenties to buy their new home.

“There was no family support network, there were no donations,” she says. “We put all that savings in there, and we have pink bathrooms. Our hot water tank went out right away. It’s definitely not a glamorous house.”

That said, McAvena is confident he will recoup his investment one day. They plan to live in the house for 20-30 years, raise their children there and enjoy all the neighborhood has to offer.

Goldberg Brodsky also has no regrets. She feels a deep connection to her neighborhood and couldn’t imagine living anywhere but New York; she says her business is booming.

“We made peace with what we can do. We made memories regardless,” she says. “If anything, it can only go up from here.”

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